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World's biggest beer makers agree to join forces

Last Updated 13 October 2015, 16:03 IST

The world's top two beer makers agreed today to join forces to create a company that would control nearly a third of the global market and threaten to dominate the US by bringing together Budweiser and Miller Genuine Draft.

After turning down five offers, British-based brewer SABMiller accepted in principle an improved takeover bid worth 69 billion pounds (USD 106 billion) from Anheuser Busch InBev, which along with Budweiser makes Corona, Stella Artois and Beck's.
Aside from the Miller beers, SABMiller owns Peroni, Grolsch and Milwaukee's Best among its 200 or so brands.


The sheer scale of the deal means it will likely run into resistance from regulators, notably in the US and China, amid concerns it could stifle competition and decrease choice for consumers. In the US, the Miller stable of beers are widely expected to have to be sold in the event of a deal.

The appeal of the tie-up for the companies is that they complement one another. AB InBev is seeking to add to its strong position in the Americas and Europe with SABMiller's presence in fast-growing markets in Africa and Oceania.

With combined sales of over USD 70 billion a year, the companies would also be in a stronger position to face the rising influence of craft beer.

Even though the acquisition is some 15 per cent costlier than AB InBev had hoped a few weeks ago, the company has a reputation for fierce and relentless cost-cutting.
Professor John Colley of Warwick Business School said to "expect substantial redundancies" over the coming year, potentially in head offices and country management teams.

"AB InBev has both a reputation and demonstrable track record for being able to effectively extract these savings," he said.

SABMiller employs 69,000 people in 83 countries. AB InBev has 155,000 workers in 25 countries.

Having dismissed previous proposals over the past few weeks as undervaluing the company, the directors of SABMiller unanimously agreed to an offer that values each SABMiller share at 44 pounds.

SABMiller's two biggest shareholders, Marlboro owner Altria and Colombia's BevCo would get both cash and shares for their combined 41 percent stake.

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(Published 13 October 2015, 16:03 IST)

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